The housing market will always have its natural ebbs and flows, along with some cyclical trends. 2017 has seen home prices continue to rise while housing inventory remains very low. At the same time, relatively low interest rates still make it affordable for buyers though it is clearly a strong seller’s market.

So, what’s in store for 2018? Nothing can be perfectly predicted, but there are definitely trends that we can look at to provide a reasonable forecast. This article highlights 10 housing and mortgage trends we could see in 2018.

1. Home Price Appreciation Remains Strong

After the past couple years of rapid home-price appreciation, we could see the prices start to decelerate in 2018. They will probably continue to go up for a little while longer, so it may be later in the year that we start to see some more cool down. The median home prices rose 6.3% in 2016 and will exceed 6% again this year. However, experts project something closer to 4% in 2018. One big reason is the increase in new home construction. New developments continue to pop up throughout San Diego County. This naturally expands the inventory and will help level out the price growth.

2. More Housing Inventory, but Demand Still Outpaces

To piggyback on trend #1, there are other factors that may contribute to increased housing inventory beyond the expansion of new construction. The baby boomer market is getting to the age where they will start downsizing more, thus selling off their family homes. Investors will also begin selling off all the properties they scooped up in the down market once prices start to plateau.

3. Increase in Home Sales

Estimates predict that home sales will rise by approximately 2.5% in 2018 with new home sales forecasted to go up by 7%. A growing inventory will definitely impact the amount of home sales nationwide.

4. Mortgage Interest Rates Rise Moderately

Many thought we’d see this in 2017, but the interest rates have stayed fairly low throughout the year. Eventually, they will go up. Some experts say that by the end of 2018, the average 30-year fixed rate may be 4.7% compared to 4.07% as of November 2017. Interest rates can be very hard to predict, though. The threat of rising rates will certainly keep home buyers encouraged to take advantage of low-interest mortgage loans while they can.

5. Homes May Be Tougher to Afford

If home prices continue to increase and interest rates eventually go up, then that decreases affordability for potential home buyers. Even as inventory expands to put more homes on the market, we could see a period in late 2018 where the factors add up to tough buyer conditions. This again puts a premium on acting while interest rates are still low.

6. Increased Equity and More HELOCs

The rising home values have resulted in increased equity for existing homeowners. It appears home values will continue to rise for much of 2018, though they may start to level out later in the year. Higher home equity will allow more homeowners to take out home equity lines of credit (HELOC) for other expenses or home improvements. While interest rates are low, cash-out refinancing is another option to consider when wanting to tap into some of that excellent equity.

7. Cyber Security Continues to be a Problem

We saw just how much damage cyber criminals can do with this year’s massive Equifax data breach. Credit scores can be affected. Email scams are specifically designed to steal wired down payments from borrowers. Accounts can be hacked. The point is you need to be extra careful when dealing with your finances online, especially when it comes to your mortgage loan. Make sure you are dealing with trustworthy people and all vendors are fully verified before you send money or release sensitive personal information.

8. More Mortgage Options – Products and Underwriting Guidelines Continue to Open Up

Some regulatory changes in 2017 will help people with credit issues have a better chance of qualifying for a mortgage in 2018. You should speak with a mortgage professional about your options and do what you can to be fully prepared for a home purchase next year.

9. Mortgage Loan Automation 

More mortgage lenders are starting to automate the loan-application process, which naturally comes with some pros and cons. It may streamline the application process, but the loan still has to be underwritten and approved. Be careful not to falsify or omit information on your application because it may come back to bite you. Make sure you are dealing with a reputable lender no matter what kind of application process they use. Remember that easier doesn’t always mean better.

10. Tax Reform Impact

With the tax reform bill still in process, it’s hard to say how it will affect homeowners, home buyers and mortgage loans in general. It will impact the real estate and mortgage industries in some way, though, so it will be important for you to stay informed.

I am personally looking forward to 2018. No matter what the real estate market does, I am always focused on helping my mortgage clients make the right financial decisions and get loan terms that work best for their personal situation. Mortgage lending is not a one-size-fits-all business, which is why Transparent Mortgage is all about transparency and personalized service every step of the way. If you are looking to buy or refinance your home, call me today at (619) 929-0199.

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.